Take 5 and come back tomorrow (13/1/25) Markets Wages Industrial Production Hotels IAG Real Estate
None of what follows is investment advice.
Market environment: Perfect storm – (Asia-Pacific markets declined with European equities down and US futures pointing lower) – Asia-Pacific markets declined as strong US job numbers led to declining bets on interest rate cuts, and additional sanctions on Russia led to higher oil prices. European equities are down, and US futures point lower.
Response to the crisis: Haves and have nots – (The average wage rise in wage agreements through December was 3.07% but there are 3.92m employees with wage rises of 4.15 (Expansion Sat p24)/Wage costs rise 18.5% more than wages due to payroll tax (El Economista p22) – The rise in wages would be positive if it were not overshadowed in terms of labour costs by the rise in payroll tax and minimum wage and the threat of a reduction in the working week. Those factors seem to be crowding out higher wage rises, especially for the less skilled workers, resulting in a flattening of the wage structure at the bottom, and an increase in inequality, with a substantial number of workers losing purchasing power.
Industrial Production: Challenging base – (November saw a 0.4% fall in industrial production (adjusted for working days and seasonality) (National Statistics institute) – The performance in industrial production (adjusted) in Novembre was 1.9pp worse than in October, showing the first decline since the start of summer. The main bright point is the 2.4% rise in production of durable consumer goods, although the effect is spoilt by the 2.8% decline in capital goods. On a YoY basis there is also the consolation that the -0.8% MoM (adjusted) performance in November 2024 compared to a challenging +1.2% in November 2023.
Hotels/IAG: Still strong – (The good start to 2025 points to a record 100m foreign tourists in the year (Cinco Dias Sat p3) – November saw a 10.3% rise in the number of foreign tourists to 5.7m, continuing the acceleration of growth rates since the year low of +7.3% in August, with a similar trend being followed by expenditure by foreign tourists with a 16% YoY rise in November ( year low +11.9% in July), with November showing a 12.5% rise in hotel accommodation expenditure (non-packaged tour +19.6%), with expenditure on international travel +19.3%.
Real Estate: Both sides don’t get it – (Regional governments led by the PP will lower the stamp duty for young house buyers to 4% (Expansion p19) – Unfortunately most of the recipes provided to improve the housing picture, especially for the young, focus on supporting demand via tax cuts or provision of government guarantees for mortgage loans, while ignoring supply, other than from a rhetorical point of view. And this applies to both the Government and the opposition. This should be good for prices and developers as the incentives will get passed on, but not really for house buyers.